Losing Economic Access is Not An Option

Something about that long term unemployment Beveridge Curve is just unnerving: reminiscent of a scorpion ready to strike, except of course that the "dirty deed" of inadequate NGDP targeting has already "struck", and the sting, scarcely removed.  Even though (measured) unemployment continues to slowly drop as, as Bill McBride of Calculated Risk says, "I don't expect much of an increase in the participation rate over the next few years. And I expect further declines in the overall participation rate over the next 15 to 20 years." Unfortunately, this is a rational response to some who thought the participation rate would eventually rise. There are structural elements which - if they are not addressed - tend to make me tend to agree with McBride, even if I could be more stubborn than him about the inevitability of it all. Of course it is "common wisdom" to say that structural elements are not the Fed's responsibility. Well...unfortunately, bridging the gap between structural/cyclical elements is no one's responsibility. Since I've not been able to find much ongoing dialogue in this regard, I've had to figure out things as I went along. That's also one of the main reasons I spend too many hours on this blog!

Society is just not prepared for such a significant slowdown, at least not in the ways some might imagine. Any time money ends up shorted for economic actors in the aggregate, further negative ripple effects continue along the way. This set of circumstances doesn't just put the "hurt" on individuals struggling to survive. It also puts the hurt on numerous communities - many of which are going into uncharted territory as their citizen's overall wealth potential continues its present decline. Most individuals without full time professional work, especially those close to "retirement" age, are often scaling back to some degree out of necessity. One important example is the Baby Boomer who is "getting by" with some form of "early" retirement (illusory though that may be) and perhaps even a home in which one can remain. That doesn't mean people will be able to give those homes the ongoing care and maintenance they will need in the years ahead.  Consequently, there are important differences between getting older in the next few decades, as opposed to "aging in place" in recent decades.

While Social Security in the U.S was never a significant amount, many who retired in earlier decades were still able to "make do" on it as a single income (if in fact they were relatively frugal all their lives), because of "grandfathered in" low tax assessment rates on homes. The earlier tax rates were especially a huge plus for those who lived in their homes for three or four decades. Anyone who takes possession of such homes today faces the higher tax rates of the present, along with Social Security that is not really adequate for those higher tax rates, let along everything else. Just the fact of those higher tax assessments would have some looking for work in the years ahead, who otherwise might not be. And yet they live in communities which are still afraid to ease regulations, to allow new employment opportunities.

This is just one illustration why structural and cyclical concerns need to be addressed together, to help communities understand how the Federal Reserve is capable of helping them overcome their own worries about future stability. Even though the Federal Reserve's role is to stabilize aggregate demand, populations need confidence that aggregate supply considerations can in fact be understood in the same context as aggregate demand, and consequently be tended to with coordinated strategies for supply side concerns. That such coordination hasn't yet happened is perhaps why microeconomics and macroeconomics have not "walked the same path" in previous rough patches. When communities see how certain exclusive microeconomic actions can add to negative long term macroeconomic patterns, they might better understand the benefits of more inclusive monetary and supply side strategies. Such understanding could provide renewed impetus for positive expectations.

As for the younger generation which needs to be getting their first good jobs now, it's a long way up the mountain before they even have the problems of "coasting downhill" that people my own age are facing. It is difficult to even speculate at this point how they may cope, if the institutions of the present do  not find more inclusive means of economic access for all of us. No excuses! Endless rounds of blame would be one thing, if we did not already have the tools we need. Technology means we can already coordinate better, more flexible forms of skills and wealth arbitrage. Sure, the digital realm is great for entertainment but I don't want to be watching movies while the next Great Depression rolls around, if I can help it. Let's just do this: print the money that needs to be printed for all of us, and find ways to include all of us in the activities that can make the purposes of such money real.